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TMI Blog2014 (3) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... action in question would not assume a different character - By obtaining the land on lease the assessee has acquired a facility to carry on business by paying nominal lease rent, therefore, lease rent paid was held allowable as Revenue expenditure - The matter remitted back to the AO for examination of the facts – Decided in favuor of Assessee. Disallowance of fees paid for new project at Bhuvneshwar – Held that:- Assessee submitted that the expenditure was incurred for the study relating to possible expansion of project in the same line of business and the expenditure has neither brought into existence any new asset nor has resulted into any benefit of enduring nature to the Assessee and the project could not materialize and abandoned – but, no tangible material has been placed on record before us by Assessee in support of the contentions - report which the Assessee had received from Ernst and Young was also not placed on record – thus, the order of A.O. upholding the disallowance needs to be upheld and that of CIT(A) on the ground set aside – Decided against Revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in deleting the disallowance of Rs. 12,28,579/- made by the Assessing Officer on account of fees paid for study relating to new project at Bhuvaneshwar to Ernst and Young. 6. We now first take up Assessee's appeal (ITA No. 922/AHD/2011) 1st ground is with respect to disallowance under section 14A. 7. During the course of assessment proceedings, A.O. noticed that Assessee had shown exempt income from tax free bonds and dividends aggregating to Rs. 6,26,76,144/-. The Assessee was asked to explain as to why disallowance under section 14A of the Act not be made in response to which Assessee interalia submitted that there was sufficient interest free funds available with it and therefore no interest bearing funds have been used for making investments. It was further submitted that no specific efforts were made by the company for earning exempt income and therefore no part of administrative expenses can be considered to have been incurred for the purpose of earning exempt income. The submissions of the Assessee was not found acceptable to the A.O. for the reason that no separate accounts with regard to earning of exempt income was maintained by the Assessee. A.O. was further of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1865/AHD/2010 order dated 28.12.2012. He placed on record at page 56 to 72 of the paper book the copy of the aforesaid order and further submitted that since the facts of the case the year under appeal are identical to that of A.Y. 06-07, the disallowance made under section 14A be deleted. 9. The ld. D.R. on the other hand submitted the disallowance under section 14A is warranted even if there is no exempt income. He further submitted that the onus was on the Assessee to prove that it has not incurred any expenditure relating to income not forming part of total income. He further submitted even in the case of Godrej Boyce (2010) 328 ITR 81 (Bom.)the Hon'ble High Court has held that A.O. was duty bound to compute the disallowance by applying a reasonable method having regard to the facts and circumstances of the case. He therefore submitted that the A.O. was justified in making the disallowance. He also placed reliance on the decision in the case of ACIT vs. Joe Marceninho Mathias (2013) 143 ITD 132 (Panji) and the decision in the case of Stream International Services Pvt. Ltd. vs. ACIT (2013) 141 ITD 492 (Mum). He thus supported the order of A.O. 10. We have heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the depreciation statement, A.O. noticed that Assessee had claimed depreciation on lease hold value of land in the case of erstwhile Torrent Power (ABC) and in the case of Torrent Power (SEC) which were now merged with Assessee. A.O. was of the view that Assessee is not entitled depreciation in view of the following facts. (i) The lease is for a period of 99 years, which is a substantial period for holding the property. (2) Once a lump sum payment was made then the assessee company is required to pay yearly rent of Rs. 1 per sq. mtr. only, which is negligible because for all intents and purposes, the assessee company had become the owner so naturally not to pay any rent for a property possessed in the capacity as good as an owner. (3) The assessee has neither made payment nor executed the lese deed in the relevant period. (4) The assessee has acquired enduring advantage for a long period of 99 years which is also in a way a perpetual right conferred on the assessee due to the payment of lump sum amount as premium. (5) The property was acquired for all intents and purposes in the capacity of an owner and the lump sum payment was made as a consideration for acquiring the rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t's decision in the case of Dy. C1T vs. Sun Pharmaceuticals Industry Ltd. (2009) 227 CTR (Guj) 206, where for A.Y. 94-95, Hon'ble Gujarat High court on the facts similar to the appellant held that entire premium paid for acquisition of land on lease of 99 years with making payment of advance rent of Rs.48 cr. and paying nominal monthly rent of Rs.40 per month is an allowable revenue expenditure. With due regard to the ratio of such decision, the appellant's claim cannot be accepted on the following reasons:- a) The appellant has not claimed entire expenditure as revenue expenditure in its return of income. In fact, the appellant has claimed the premium paid for lease hold land as intangible asset and claimed depreciation on it. Further, the previous year is not the first year of such payment and claim and therefore, allowability of entire payment as revenue cannot be considered in the present asst. year. b) The claim of entire premium paid as revenue expenditure was one of the grounds of appeal (ground No.2) as discussed earlier before the Hon'ble IT AT in appellant's own case, but the same was dismissed by the Hon'ble Gujarat High Court (supra) to claim i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of depreciation lease hold land was raised by Assessee in A.Y. 06-07 before the Tribunal. The co-ordinate Bench of Tribunal decided the issue in ITA No. 1865/AHD/2010 order dated 28.12.2012 by holding as under:- "17. Before us at the outset the ld. A.R. submitted that in the assessee's own case in the case of Torrent Power Ltd., (formerly known as Torrent Power Sec. Ltd.) in ITA No. 293/A/2008 and ITA No. 771/AHD/2008 on identical facts Hon'ble ITAT has restored the matter to the file of A.O. He therefore submitted that following the aforesaid decision, in the present appeal, similar directions may be issued and the matter may be remitted to the file of A.O. 18. The ld. D.R. fairly agreed that the matter be remitted back to the file of A.O. for verification in the light of decision in the case of DCIT vs. Sun Pharmaceuticals Industries Ltd. (supra). 19. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the facts and circumstances of the case in the present appeal are identical to that of earlier years. We find that on an identical issue in Assessment year 2004-05 , the co-ordinate Bench of Tribunal in assessee& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent paid was held allowable as Revenue expenditure. In this context we may like to add that though the Respected Co- ordinate Bench vide an order dated 21-1-2011 for A.Y. 2005-06 has restored both the grounds for re-adjudication by A.O. but the distinction between the two grounds is that ground No. 1 Is about claim of depreciation on lease hold rights and ground No.2 is about the claim of expenditure pertaining to the said lease. The Hon'ble Court has decided only in respect of deductibility of lease rent but since the matter now stood restored back to the A.O., therefore, we hereby direct to keep in mind this subtle distinction and re-decide as per law. Identically, these two grounds may be treated as allowed but for statistical purposes." 20. Since it is an undisputed fact that the facts in the present year are similar to that of earlier year, we are of the view that since for A.Y. 2004-05, the matter has been remitted back to the file of A.O. to examine and decide the issue in line with the directions contained therein, in the year under appeal also the matter be remitted back to the file of A.O. to decide the matter. We respectfully following the decision of the co-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve referred case of Priya Villages Roadshows Ltd. wherein, it is held that, such expenditure was revenue in nature. The ITAT Ahmedabad in the case of Shri Dinesh Mills Ltd. vide their decision dated 30.7.2010 in respect of similar claim held as under: "We find that genuineness of the expenditure is not in doubt. Further it is also not in dispute that the expenditure has not resulted in acquisition of any capital asset of enduring nature in the hands of the assessee. Further, the said expenditure was incurred to run the existing business efficiently. The Hon'ble Gauhati High Court in the case of Assam Asbestos Ltd., (supra) has held that expenditure incurred on preparation of feasibility report for a project which did not come into existence was of .revenue nature as the endeavour was to aid the existing business in supply of raw materials. In the instant case also the endeavour was to benefit existing business as by constructing the hospital the assessee could have provided better medical facilities to staff at a lower cost therefore, on the above facts in view of the aforesaid decision of the Hon'ble Gauhati High Court we are of the view that the expenditure in quest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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